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President Trump Releases FY 2020 Budget Proposal

March 15, 2019

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PRESS CONTACTS
Tannaz Rasouli, Sr. Director, Public Policy & Strategic Outreach

The White House March 11 released portions of A Budget for A Better America, the president’s fiscal year (FY) 2020 budget proposal, with additional details expected the week of March 18. The budget proposes significant decreases in federal spending overall, including a 12% reduction to the Department of Health and Human Services (HHS). In addition to deep cuts to Medicare, graduate medical education (GME), and Medicaid, the proposal also requests reduced funding for the National Institutes of Health (NIH), the Veterans Affairs (VA) Medical and Prosthetic Research, and health workforce programs, and would undermine the 340B Drug Pricing Program.

AAMC President and CEO Darrell G. Kirch, MD, issued a March 11 statement encouraging Congress to reject the proposed budget, noting that it “would derail critical progress on cures and treatments, ravage America’s health care workforce infrastructure, and dismantle the health care safety net.”

For the NIH, the administration proposes $34.4 billion in FY 2020, a nearly $5 billion or 12% cut below the FY 2019 enacted program level. The AAMC is among over 300 members of the Ad Hoc Group for Medical Research recommending $41.6 billion for NIH in FY 2020.

As in the past two years, the president’s request proposes to eliminate the Agency for Healthcare Research and Quality (AHRQ) and fund it as a new institute within NIH. The budget requests $256 million for the proposed replacement National Institute for Research on Safety and Quality, which would represent an $82 million (24.3%) cut below AHRQ’s current funding level.

The budget proposes to eliminate Medicare GME, Medicaid GME, and Children’s Hospital GME (CHGME) and create a single, capped grant program that would be funded out of the Treasury. Growth in total GME funding would be limited to the sum of Medicare and Medicaid’s 2017 GME payments, plus 2017 CHGME payments. This amount would be adjusted for inflation according to the Consumer Price Index for all Urban Consumers (CPI-U), minus one percentage point annually.

Under the proposed new program, payments would be made to hospitals based on the “number of residents at a hospital (up to its existing cap) and the portion of the hospital’s inpatient days accounted for by Medicare and Medicaid patients.” The HHS secretary would have discretion to modify the amounts distributed based on several factors, including the proportion of residents training in priority specialties or programs, health care professional shortages, and educational priorities. The proposal would have an overall net cut of $47.9 billion over 10 years.

Additionally, the proposed budget would make significant changes to the Medicare program by requiring all off-campus Hospital Outpatient Departments (HOPDs) to be paid under the Physician Fee Schedule, including HOPDs that are exempt. This would result in a cut of $28.7 billion over 10 years. Additionally, it would expand so-called site neutral payment policy to on-campus HOPDs and pay them under the physician fee schedule for certain services, such as clinic visits. The proposal would cut $131.4 billion over 10 years. The budget would also reduce Medicare reimbursement for bad debt from 65% to 25% over three years — an estimated cut of $38.5 billion over ten years.

The proposed budget would establish a new process to distribute Medicare uncompensated care payments to hospitals based on share of charity care and non-Medicare bad debt, as reported on Medicare cost reports. The total amount of available uncompensated care payments would be equal to FY 2019 funding levels (updated annually by CPI-U) and funded from the general fund of the Treasury rather than the Medicare Trust Fund. The proposal would result in a $182.5 billion Medicare cut over 10 years, however $84.5 billion in increased spending from general revenues would result in a net cut of $98.0 billion over 10 years.

The budget proposal would cut $1.54 trillion in Medicaid spending from the program over 10 years. It would allow the Medicaid Disproportionate Share Hospital cuts to go into effect and extend the cuts for an additional four years through FY 2029, resulting in a $25.9 billion cut. The budget also supports efforts to repeal and replace the Affordable Care Act as proposed in the 2017 Graham-Cassidy legislation. This plan would significantly change Medicaid financing by allowing states a choice between a per-capita cap or a block grant and repeal Medicaid expansion. In addition, the budget includes a variety of proposals that would affect individuals’ benefits or eligibility for Medicaid coverage, including requiring that “able-bodied, working-age adults” meet work and community engagement requirements and allowing states to impose asset tests to determine eligibility.

Similar to the FY 2019 request, the budget proposes several changes to the 340B program. Beginning in calendar year (CY) 2020, the administration would redistribute the savings from the Medicare cuts in the 2018 outpatient rule to 340B hospitals that provide at least 1% of patient care costs in uncompensated care based on the percentage of all uncompensated care they provide compared with other outpatient hospitals. The budget does not recognize that the Medicare Part B payment reductions to 340B hospitals was overturned by the D.C. District Court. Additionally, the administration proposes to give the Health Resources and Services Administration (HRSA) broad regulatory authority over the program, require covered entities to report on their total savings and how those savings are used, and impose a user fee on 340B drug purchases from covered entities.

The president’s budget requests significant cuts to the HRSA Title VII health professions and Title VIII nursing workforce programs. The budget blueprint proposes to eliminate all the HRSA diversity pipeline programs, Area Health Education Centers, Public Health and Preventive Medicine, and Primary Care Training and Enhancement programs. The request includes $5 million for the National Center for Health Workforce Analysis, a $1 million (16.6%) decrease from the FY 2019 level. A breakdown of funding for these programs is expected to be released in the president’s full budget. The Health Professions Nursing and Education Coalition, convened by the AAMC, recommends $690 million in FY 2020 for HRSA Title VII and VIII programs.

The president’s FY 2020 budget requests a total of $415 million for the National Health Service Corps. Within that total, the request includes $105 million in discretionary funding, a $15 million (12.5%) decrease below the FY 2019 appropriation that included additional funding to help address the opioid crisis. Additionally, the budget retains $310 million mandatory appropriation fund in both FY 1020 and FY 2021, which would require congressional reauthorization.

The President’s request includes $762 million for VA research in FY 2020, a $17 million or 2.2%, decrease from FY 2019 enacted levels. The president’s budget also includes $16.58 billion for VA Community Care, a $1 billion (6.4%) increase over the FY 2019 comparable level. This total includes a shift in Veterans Choice Program mandatory funding to a discretionary appropriation to support MISSION Act implementation and new VA community care networks. The budget request includes $80.2 billion for VA medical care in FY 2020, a $7 billion (9.6%) increase from the 2019 enacted level. The budget also proposes $87.6 billion in 2021 advance appropriations for VA medical care programs.

The budget request also proposes $7.1 billion for the National Science Foundation (NSF), a $975 million or 12.1% decrease from FY 2019 funding levels. The AAMC is among over 125 members of the Coalition for National Science Funding recommending $9 billion for NSF in FY 2020.

For the second year in a row, the president’s budget request would eliminate Public Service Loan Forgiveness, which forgives federal Direct student loans after 10 years of repayment in public service. The request also includes a proposal for a single income-driven repayment plan that would:

  • Increase a borrower’s monthly payment to 12.5% of discretionary income compared to 10% under the current Revised Pay As You Earn (REPAYE) program;
  • Increase total repayment to 30 years for graduate and professional students compared to 25 years under current REPAYE; and
  • Eliminate the Standard Repayment Cap, which would push physicians into a 10-year Standard plan with monthly repayments of $3,000 to $3,700 based on sample repayment scenarios.

The budget request notes that “all student loan proposals would apply to loans originating on or after July 1, 2020, except those provided to borrowers to finish their current course of study.” These proposals would require legislative approval by Congress before being implemented by the Administration.

Members of the administration, including HHS Secretary Alex Azar and Office of Management and Budget Acting Director Russell Vought, spent the week on Capitol Hill testifying in support of the budget and the president’s priorities [see related story].

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